Correlation Between Kongsberg Automotive and BW Energy

Can any of the company-specific risk be diversified away by investing in both Kongsberg Automotive and BW Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Kongsberg Automotive and BW Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Kongsberg Automotive Holding and BW Energy, you can compare the effects of market volatilities on Kongsberg Automotive and BW Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Kongsberg Automotive with a short position of BW Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kongsberg Automotive and BW Energy.

Diversification Opportunities for Kongsberg Automotive and BW Energy

0.45

Correlation Coefficient

Kongsberg Automotive  BW Energy

Very weak diversification

The 3 months correlation between Kongsberg and BWE is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Kongsberg Automotive Holding and BW Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BW Energy and Kongsberg Automotive is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Kongsberg Automotive Holding are associated (or correlated) with BW Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BW Energy has no effect on the direction of Kongsberg Automotive i.e., Kongsberg Automotive and BW Energy go up and down completely randomly.

Pair Corralation between Kongsberg Automotive and BW Energy

Assuming the 90 days trading horizon Kongsberg Automotive Holding is expected to under-perform the BW Energy. In addition to that, Kongsberg Automotive is 1.13 times more volatile than BW Energy. It trades about -0.03 of its total potential returns per unit of risk. BW Energy is currently generating about 0.0 per unit of volatility. If you would invest  2,450  in BW Energy on September 5, 2024 and sell it today you would lose (195.00) from holding BW Energy or give up 7.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Kongsberg Automotive Holding  vs.  BW Energy

Kongsberg Automotive

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kongsberg Automotive Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Kongsberg Automotive may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BW Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BW Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Kongsberg Automotive and BW Energy

The main advantage of trading using opposite Kongsberg Automotive and BW Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kongsberg Automotive position performs unexpectedly, BW Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in BW Energy will offset losses from the drop in BW Energy's long position.

The idea behind Kongsberg Automotive Holding and BW Energy pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Commodity Directory module to find actively traded commodities issued by global exchanges.